Unit 5 assignment
Question 1. (30 points total)Use this balance sheet and
income statement from Carver Enterprises to complete partsa and b: 
a.
(15 points) Prepare a common size balance sheet
for Carver Enterprises. Complete the common-size balance sheet: (Round to one
decimal place.)
b.
(15
points) Prepare a common-size income statement for Carver Enterprises.Complete
the common-size income statement: (Round to one decimal place.)
Question 2.(10 points total) Use this data table of Campbell
Industries liabilities and owners’ equity to complete partsa and b.
a.
(5 points) What percentage of the firm’s assets
does the firm finance using debt (liabilities)? (Round to one decimal place.)
b.
If Campbell were to purchase a new warehouse for
$1.3 million and finance it entirely with long-term debt, what would be the
firm’s new debt ratio?
Question 3. (10 points total)(Liquidity analysis)Airspot
Motors, Inc. has $2,433,200 in current assets and $869,000 in current
liabilities. The company’s managers want to increase the firm’s inventory,
which will be financed using short-term debt. How much can the firm increase
its inventory without its current ratio falling below 2.1 (assuming all other
assets and current liabilities remain constant)?(Round to onedecimal place.)
Question 4. (10 points total)(Efficiency analysis)Baryla
Inc. manufactures high quality decorator lamps in a plant located in eastern
Tennessee. Last year the firm had sales of $93 million and a gross profit
margin of 45 percent.
a.
(5 points) How much inventory can Baryla hold
and still maintain an inventory turnover ratio of at least 6.3 times?(Round to
onedecimal place.)
b.
(5 points) Currently, some of Baryla’s inventory
includes $2.3 million of outdated and damaged goods that simply remain in
inventory and are not salable. What inventory ratio must the good inventory
maintain in order to achieve an overall turnover ratio of at least 6.3
(including the unsalable items)? (Round to onedecimal place.)
Question 5. (15points total)(Profitability and capital
structure analysis)In the year that just ended, Callaway Lighting had sales of
$5,470,000 and incurred cost of goods sold equal to $4,460,000. The firm’s
operating expenses were $128,000 and its increase in retained earnings was
$42,000 for the year. There are currently 99,000 common stock shares
outstanding and the firm pays a $4.770 dividend per share. The firm has
$1,180,000 in interest-bearing debt on which it pays 7.7 percent interest.
a.
(5 points) Assuming the firm’s earnings are
taxed at 35%, construct the firm’s income statement.
b.
(5 points) Calculate the firm’s operating profit
margin and net profit margin.(Round to one decimal place.)
c.
(5 points) Compute the times interest earned
ratio.
What does this tell you about Callaway’s ability to pay its interest
expense? (Fill in the blank with the times interest earned ratio from above and
select the best choice.)
1) Callaway’s operating income
can fall as much as______ times the interest expense and the company would
still be able to service its debt.
2) Callaway’s interest expense is
_______ times higher than its competitors.
3) Callaway’s gross profit can
fall as much as ______ times and still be able to service its debt.
4) Callaway’s operating income
can fall as much as ______ times and still be able to repay its debt.
What is the fin’s return on equity? (Select the best choice.)
1) The firm’s return on equity is
the same as the net profit margin, 9.4%.
2) The firm’s return on equity is
the sum of the operating profit margin and the net profit margin, 25.5%.
3) There is not enough
information to answer this question.
4) The firm’s return on equity is the same as
the operating profit margin, 16.1%.
Question 6. (5 points total)(Market value analysis) Lei
Materials’ balance sheet lists total assets of $1.16 billion, $132 million in
current liabilities, $415 million in long-term debt, $613 million in common
equity, and 58 million shares of common stock. If Lei’s current stock price is
$52.08, what is the firm’s market-to-book ratio? (Round to one decimal place.)
Question 7. (5 points total) (DuPont analysis)Bryley, Inc.
earned a net profit margin of 5.1 percent last year and had an equity
multiplier of 3.49. If its total assets are $109 million and its sales are $157
million, what is the firm’s return on equity?(Round to one decimal place.)
Question 8. (15 points total)(Calculating financial ratios)
Use the balance sheet and income statement for the J. P. Robard Mfg. Company to
calculate the following ratios:
Current ratio(Round to two decimal places.)
Times interest earned(Round to two decimal places.)
Inventory turnover(Round to two decimal places.)
Total asset turnover(Round to two decimal places.)
Operating profit margin(Round to one decimal places.)
Operating return on assets(Round to one decimal places.)
Debt ratio (Round to one decimal places.)
Average collection period(Round to one decimal places.)
Fixed asset turnover(Round to two decimal places.)
Return on equity(Round to one decimal places.)
